Director: Corporate-911
Companies such as KPMG, PwC, Deloitte and McKinsey play an important role in surveying the business landscape, identifying trends that are influencing business, and the steps that can be taken to address the challenges that are present in the market. CEOs inform these insights
One of the publications I look forward to reading is the KPMG CEO survey. The information in the survey is collected from a study that is conducted over a 12-month period. It reflects on the year that was and identifies trends that will be present for the year ahead.
I read the 2022 survey with much anticipation. South Africa has mostly returned to pre-Covid trading conditions (bar the loadshedding beast) but the challenges left behind from Covid are still very present. How do CEO’s address this?
CEOs need to mitigate risks
Ignatius Sehoole, CEO of KPMG in South Africa, points out that the latest edition of the survey examines the global pandemic, inflationary pressures and geopolitical tensions while reflecting some positive outcomes with local CEO’s stating that they are already mitigating any anticipated recession risks by focusing on Technology, Talent and ESG to shape their progress over the next 3 years.
Local CEOs are adequately prepared for the anticipated recession in the next twelve months. In fact, the survey revealed that 6 out of ten local executives believe the most important growth objectives over the next three years is organic growth (i.e., innovation, R&D, capital investments, new products and recruitment) as well as strategic alliances with third parties.
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Steps to boost productivity
He points out that a promising 72% of local executives have already taken steps to boost productivity in preparation for anticipated recession, indicating CEOs are cautiously focused on future opportunities during such uncertainty.
The biggest challenge in delivering ESG strategy over the next 3 years will be on identifying and measuring agreed metrics.
When examining the challenges in delivering ESG strategies we have seen that local CEOs list identifying and measuring agreed metrics as the biggest challenge compared to pressing business/economic matters redirecting focus from ESG for global CEOs.”
ESG importance
The importance of ESG initiatives on businesses, especially with regards to improving financial performance, driving growth and meeting stakeholder expectation cannot be stressed enough.
Sehoole points out that South African CEOs expect changes in headcount over the next 3 years. In fact, 70% of CEOs indicated that they are expected to increase headcount over the period by a maximum of 10%, with most CEOs focusing on Talent and Technology in preparedness for forecasted recession. It is important to note that the single most pressing concern for local executives is economic factors such as rising interest rates, inflation and an anticipated recession.
Addressing priority elements
A key contributor to the KPMG CEO Survey is Business Leadership South Africa. The company’s CEO, Busisiwe Mavuso points out that it’s heartening that 71% of global CEOs are confident about the global economy’s growth prospects over the next three years, even though more than 80% first expect a global recession, likely to hit over the next 12 months.
Overall, they portray confidence in the resilience of the global economy and believe the recession will be short-lived.
She points out that South Africa will be entering this recessionary period on an extremely weak footing, with its high levels of poverty and unemployment making it extremely vulnerable to the effects stemming from the global slowdown in economic activity. In that context, the country desperately needs the global economy to recover quickly and resume growth, which will lift our economy along with other emerging markets.
Technology and talent
Mavuso points out that the concerns of CEO’s when it comes to technology revolve around disruptive technology being the number one risk to organisational growth. Many CEOs are directing investment to digital opportunities and divesting where they face digital obsolescence.
“I’d venture to say that SA’s private sector is up to world-class standards when it comes to business technology. The long-awaited spectrum auction was completed in March this year and although the process has stalled until the migration from analogue to digital television is completed, SA’s telecoms companies will be better equipped to compete internationally once they are able to use the extra bandwidth,” said Mavuso.
Where SA is lacking, however, is in integrating fourth industrial revolution (4IR) technologies into our education system. 4IR encapsulates the rapid changes to technology, industries and societal patterns and processes due to increasing interconnectivity and smart automation.
This ties in with the next priority element: talent. The state of our basic education system is sub-optimal with South African learners consistently ranking among the lowest in the world in terms of maths, science and literacy. The absence of 4IR in the syllabus will leave our matriculants further behind.
She adds that this means the skills shortage in South Africa will remain chronic for some time to come, while local companies are further hampered by too many restrictions and overly bureaucratic procedures when it comes to hiring skilled personnel from outside the country. There has been some progress in trying to streamline the procedures and to match the government’s critical skills list to private sector requirements but a lot of progress is still required.
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Embracing ESG
Mavuso points out that, for South Africa it’s tempting to say that the ‘S’ is the most urgent factor in ESG given the urgent socioeconomic problems we face, with more than a third of the workforce unemployed and with workplaces still skewed largely in favour of white people, particularly at senior management levels. Indeed, there is an intense debate happening on whether to introduce a permanent basic income grant. But given that the country is the world’s 12th-largest carbon emitter, the environment aspect of ESG must be tackled with an equal amount of urgency.
This brings together the E and S factors because SA’s coal industry employs a significant portion of the population and in pivoting away from our coal-based energy supply to renewables, the social element of minimising job losses is crucial. The environmental and social issues are thus deeply integrated in SA’s just energy transition.
She adds that grappling with many structural constraints including insufficient energy supply and inefficient transport and ports systems, SA will struggle to keep up with the global growth anticipated in this survey until the reforms to address the problems are successfully implemented. It is only through economic growth that we can sustainably address our deep social challenges.
Well placed confidence
It is encouraging the business leadership and the CEO’s of major companies express confidence in the future growth of the economy.
It is a well placed confidence but predicated on many things going right. Our energy requirements need to be addressed and load shedding needs to end within two years. The social fabric of our fragile society needs to survive the 2024 Election without too much violence, and South Africa needs to emerge with a stable and working government; especially at local level. Finally, South Africa’s economic restructuring continues to be implemented in a fair and sustainable way.
Robin Nicholson is the Director of Corporate-911 and is a Senior Business Rescue Practitioner.
